Petroleum follies

In my line of work, I spend a fair amount of time thinking about policies that could be a lot better if they were redirected or revised somewhat, even a lot. But the gas price story is unusual in the near unanimity with which public figures and commentators are competing to find a way to make things worse instead of better. I recall few debates in which so nearly everyone isn’t just mistaken, but has the sign wrong, looking for ways to move in precisely the wrong direction.

Aside from the occasional glimmer, like John Tierney’s commendable take in his April 29 column (he proposes a classic Pigovian tax on gasoline returned to “everyone” in a way that doesn’t tangle the scheme up with a zillion other good purposes (for example, per capita checks, or deposit to the Social Security trust fund)), the ideas in play are the most disheartening collection of wrongheaded and ill-informed goofiness I can recall…well, maybe abstinence-only sex education is up there.

I don’t know where to start with this stuff. Hydrogen is not a fuel, and neither is electricity. There’s no mine for either of them; if people start plugging in cars into the wall, power plants of all kinds will just rev up faster and longer, and the marginal electricity is made from natural gas, a fossil fuel that’s only somewhat less greenhousy than oil, though a lot less than coal. These cars have to haul an enormous stack of heavy batteries around, and half the energy that goes into the power plant is lost in the transmission and generation system anyway. “Clean coal” doesn’t mean “coal that doesn’t cause global warming,” it means less pollution of every other kind: coal, clean or not, is the worst greenhouse fuel until we figure out how to capture all the stack gas and put it somewhere (this is called carbon sequestration, and it’s a very long-term, daunting, technological road at this point).

As a piece of social policy, one has to wonder about the wisdom of slapping a big tax on the only people who are providing any of this oil we want so badly. One doesn’t even have to wonder about the whole concept of all the schemes to make oil less expensive; did the demand curve for petroleum suddenly tilt the other way while we weren’t looking? One more time, what’s the logic of subsidizing domestic production and exploration: is there some prize for being the first country to use up its petroleum?

When I did wind tunnel research on how tall buildings affect the street-level winds around them, the architects always asked whether some sort of canopy over the door would help, and we had to explain that the wind is very big, and so is the building, so anything that would change the way the wind blows also has to be very big. The oil system is very big, and poking at it with tiny instruments like deposits to the strategic oil reserve, or rushing to slurp out the two years’ worth of oil imports in ANWR, are not going to make any important difference. Actually, no bullet is silver, even though we desperately want to think wind power, or biofuels, or nuclear, or turning off the lights more carefully, will “solve” the energy crisis. Lots of these will be incrementally helpful, but none of them is as big as the oil flow we’ve become habituated to, and every one has a really sobering social price of one kind or another.

Petroleum is not like solar energy. Fossil fuels are a stock, not a flow, of sunlight that was stored up over millions of years when no-one needed to drive kids to the soccer game. We’ve had a nice century drawing down that bank account, and it’s over. Maybe, as Rick says, not right away, but soon. “Soon” in policy earthquake terms is a few decades. There’s lots of coal, but if we start really playing that game with current technology (that is, burning it into CO2 that goes into the air), a lot if it will be used up (for example) keeping Europeans warm in a subarctic climate when the Gulf Stream stops. Of course the beach will much easier to drive to as it moves inland.

What will make a difference is to use a lot less, and using less oil means real behavioral change on a broad, retail level. It absolutely doesn’t mean making gasoline cheaper! We’re talking about things like living in smaller houses, close enough together to get people out on their feet and bicycles, and into trains and trams. Of course this has all sorts of quality-of-life payoffs in my view, but it’s a hard sell to a society that treats “get in my big car alone, drive where I’m going at 60 mph, and park free when I get there” as some sort of basic moral right. Still, I cannot understand a family that would rather have a house and a big yard that Mom and Dad don’t play with their kids in because they’re on the road commuting three hours a day, than an apartment with a playground nearby that the family can actually occupy and enjoy each other in…

We should be talking about paying a lot of taxes to pay for things like transit and community swimming pools where we can enjoy our neighbors, instead of the thousands of backyard pools that have no-one in them almost all the time, and community soccer fields instead of the ridiculous little patches of green that are useless once the kids are school age. We should be talking about having less stuff, and less house that needs to be filled up with it, and more shopping for it locally, on our feet, with a little wheely shopping cart instead of an SUV. What could possibly make up for having less stuff, though? Well, how about listening to more music and making more of it ourselves? And dinner with friends who come on the bus and don’t have to find a parking place is a pretty low-impact, high-quality life experience…

We’re not talking about those things, though; we’re talking (praying, actually) about making it not so, please. Our politics have a long, toxic tradition of candidates’ and voters’ mutual infantilization. The politicians treat an election, or an office, as the worst thing one can lose, and promise to fix everything with a trick that won’t require any actual work by us; we vote for people who tell us fairy tales that would excuse us from any heavy lifting if they were true, and excuse us from confronting downers and grownup responsibilities if we pretend to believe. This game is being played at a really frenzied level around gas prices, and the mix of ignorance and plain mendacity both parties are wallowing in is–this is really amazing–neck and neck with the immigration performance in the theater next door.

Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact:

18 thoughts on “Petroleum follies”

  1. Michael says we should all live in smaller homes closer to our jobs, own small cars that we drive only rarely, don't have yards, shop less, and spend more time with our neighbors. On a purely philosophical level, his points are solid. On a political level, he might as well wish for a pony while he's at it.
    Tom Schelling's view here is far more realistic: Global warming is a fact and there's not a damned thing anyone can do to prevent it, so we should focus on damage mitigation in the form of economic aid to those countries who will be most affected by rising sea levels and loss of agriculture due to climate change. It's obviously far from an ideal solution, but it has the distinct advantage of being possible.

  2. I came west almost eight years ago, because the values in the southern mid-Atlantic communities I had grown up in were as oppressingly present as Mark describes. (I wasn't nearly so articulate back then – at that point, I just thought I wanted to work in the music industry)
    I've been happy to discover other options in the Pacific NW. My wife and I purchased a small (but expensive) home north of Seattle, inheriting an organic garden in the process. I telecommute 3-4 days a week and we are slowly building a like-minded localized community of those who want to live off the "American Choice" grid. We haven't gone Amish, just getting more practical about our cultural spending. I'd be up for downgrading to a condo with a pea patch, if band practice didn't disturb the neighbors – I've also taken up the accordion. 🙂
    My hope is that my family and other east coast brethren visit and are swayed by my "success." Not much else I can do to elicit change in the madness that is America now.

  3. Coal isn't incremental. It's either worthless or, if we can sequester CO2, a 400-year silver bullet. I'm a lukewarm nuclear fan, but waste handling and security are still troubling and unresolved.

  4. Jason B.: You spent more money on your "small home north of Seattle" than many residents of your former community will take home in their lives. I'm glad it has worked for you, but I don't think you can claim it's the solution for everyone.

  5. This is also a great opportunity. The Boomers are a very large cohort, and age 60 is a time many people think about downsizing their home and lifestyle. Additionally, there is quite a bit of age discrimination in the labor market, so there are probably lots of Boomers who would be willing to keep working in a humane workplace.
    A very large transition effort could be implemented with off-the-shelf technology, for example, building condos with good insulation near transit lines.
    Like most other forms of extremely wasteful activity, it's not really going to hurt that much to change, at least not compared to the pain of continuing.

  6. but waste handling and security are still troubling and unresolved
    Waste handling is solved. The transport system is well defined and tested. (Ever seen the video of the locomotives hitting the transport caskets? Pretty impressive.) The storage facility is well thought out, but is being held up by NIMBYism. Security is somewhat of an issue, but if the military can safely store nuclear weapons, we can protect waste and nuke plants against anything but invading armies.
    In the short term, nuclear fission plants are the only practical solution to the CO2 problem. Hydrogen is impractical. Rebuilding our cities is, um, well, a fantasy. The cost would dwarf rebuilding the electrical grid with nuclear plants.

  7. I like on-site dry-cask storage of waste fuel, actually. NIMBYism isn't a trivial obstacle, though; I wrote a book about facility siting in 1983 and we haven't actually got much better at it since, as far as I can tell from Quah's 2002 book.
    What motor fuel are you expecting, made from nuclear power, that will keep our current transportation habits affordable?

  8. We need do need to use energy more efficienctly and decarbonize – but there are paths to it besides either "small is beautiful" or
    The following post by me at MaxSpeak discusses decarbonizing the grid without incorporating nuclear energy:
    Renewable Energy: Another Grid is Possible"
    The second in the same series address Renewable energy and scale
    Renewable Energy: Big is Beautiful"
    The third addresses carbon taxes and the economics and policies of a
    switch to renewable energy:
    "Rejecting the Gospel of the Tooth Fairy"
    The answer of course is that we don't have to continue to produce electricity from natural gas or coal.

  9. I've been to a few middle-class Mexican houses in my travels there, and the contrast is interesting.
    Obviously, architecture and building methods are different due to the cost of local materials (e.g. more tile, less carpet). The biggest differences are due to the lower income of middle-class Mexicans. The homes are fairly small, 1000-1200 sqft, I'm guessing, and share side walls with their neighbors. That's more space and energy-efficient, though energy efficiency is a non-factor since nobody needs AC or heat where I go. Also, the front yard is basically a driveway for one or two small cars. Then, there might be a neighborhood park with a swing set, etc.
    So, it's a smaller impact on the earth, but the Mexican subdivision builders weren't thinking of that, they were meeting the needs of their customers. Upper-class Mexican homes are seperate, and circled by a wall, maybe with an electric fence.
    The middle-class Mexican has less to fix, less grass-cutting/tree & shrub planting/watering, etc. In other words, more time for other stuff.

  10. Michael,
    Obviously, using nuclear fission to create electricity which can either be stored in batteries or used to convert water to hydrogen gas are the two, ideal gasoline replacements. I do mean ideal in both senses: it is cleaner than oil based fuels and it is theoretically possible but the practical details may turn out to be impossible.
    In my mind, either electric or hydrogen vehicles will first have to appear someplace that has an abundant supply of electric from non-fossil fuel sources to prove their practicality. Perhaps the jump in oil prices will push a European country to try this.

  11. My recollection is that integrated coal gasification combined cycle ("clean coal")actually has a lot of near-term promise for reducing CO2 emissions, but I can't back that up at the moment.

  12. The second discusses renewable energy a bit more and points out that the in renewable energy small is not beautiful. In fact the post shows that:
    "Renewable Energy: Big is Beautiful"
    I think the reason the spam filter ate my previous was post was that there were multiple URLs in it.
    So I'm posting each of these in a seperate comment and they seem to be going through. The reason the URLs were stripped out of the comment Mark was kind enough to post for me is that apparently the blog interface stripped them out out (as opposed to going through the comment interface.)

  13. I've tried to post this comment a couple of times but I haven't seen it show up. Perhaps the links in it (to factual sources) made it look like spam. I've tried breaking them up now, leaving enough info to find the data.
    I suppose there might be a few parents so devoted to their leftist ideologies that they prefer apartment life, but I've tried it and it sucks if you have kids. Those public parks and swimming pools which you imagine to be so welcoming are actually quite inconvenient (try carrying a tired child home with two others mooching behind and whining–I have) and filled with threats that rarely exist in backyards. Anyway, why take my word for it? People's "revealed preferences" show that parents overwhelmingly prefer detached homes for their families and will sacrifice mightily to obtain them.
    As for "dinner with friends who come on the bus" that sounds like the fantasy of a childless urbanite. I defy you to take three children of ages 2 through 6 to a friend's for dinner on a city bus (and home after 9pm).
    You say you're worried about global warming. Well, leaving aside any debate over whether your fears are well-founded, the fastest and cheapest way we could reduce our greenhouse gas emissions would be to substitute nuclear-power electric generation for coal-fired generation.
    ALL energy-related US greenhouse emissions, expressed in equivalent million- metric- tonnes (MMT) of CO2, total to 5,868 MMT CO2/year (2004 numbers, trend is slowly upward). Electric power generation produced on the order of 2,293 million metric tonnes (MMT) of CO2 in 2004. About 82% of that came from burning coal (see a DOE report called Emissions of Greenhouse Gasses in the US 2004 in file 057304.pdf). We could replace virtually all coal-fired generation with nuclear (no new tech or distribution infrastructure [see hydrogen, problems with!] needed) to save about 1,880 MMT of CO2 yearly. (That would be a third of all energy-related emissions, 5,868 MMT CO2/year.)
    No feasible reduction of motor fuel consumption could compare. The entire transportation sector emits only 1,876 MMT/year, so if we gave up all mechanical transportation–if everyone walked everywhere and we had NO supermarkets (all those fresh veggies gotta travel from the farm to the produce department, remember)–that would reduce emissions less than just substituting nuclear for coal.
    (Of course giving up transportation would be insane, no one is willing to starve to death now in order to prevent global warming years in the future. It would require a disaster of unprecedented magnitude to persuade people to reduce transportation fuel consumption/greenhouse emissions even by 10%.)
    If you really wish to reduce greenhouse emissions, go after electric generation. Your proposals to save motor fuel by completely changing peoples' living circumstances cannot gain popular support. Yet you could replace far-away coal-fired generation with nuclear and people wouldn't even notice! The coal miners you'd put out of work (fewer than 100,000 according to DOE) would be easier to placate than all the parents you want to force to take their kids shopping by bus.
    What about cost, you ask? Well, suppose you have to increase electric rates 50% (likely an overestimate) to pay for the coal-to-nuclear transition. The total amount paid yearly in the US for retail electricity (i.e., not counting the small fraction of power which users generate for themselves) is around $270 billion (see a DOE report called Revenue from Retail Sales of Electricity to Ultimate Customers by Sector, by Provider, 2005). So for, say, $135 billion more annually, we could stop burning coal. The Federal government collects somewhere over $2 trillion in taxes of all kinds every year. So replacing all coal-fired generation might feel like rasing federal taxes 7% (that is, increase every $14 you pay now to $15). That would be stiff, but at least higher electric bills would be spread evenly across the economy. If you want to do something dramatic about global warming, that would clearly give you the most bang for the buck.
    It wouldn't even affect our trade statistics much, since we trade little coal internationally.
    If you want to hold the line on gasoline emissions, just eliminate the pure-pork ethanol mandate. No kidding… that would reduce CO2 emissions and gas prices at the same time. 10% gasohol (the normal blending ratio) gives 4% few miles-per-gallon, so to go the same distance people burn ~21 gallons of gasohol instead of ~20 gallons of straight gasoline–without reducing air pollution. More of the energy from burning ethanol comes from oxidizing the carbon in it (compared to gasoline), so burning ethanol releases more CO2 than burning gasoline.
    (It's true that growing corn (from which we make ethanol) absorbs some CO2, but we could grow woody plants instead and absorb much more. Then we could just stack the wood somewhere instead of burning it, to withdraw even more CO2 from the atmosphere.)
    If you really want to reorder people's lives for aesthetic reasons (rather than to prevent global warming), then sure, try to restrict their mobility. I hope you fail. If you're serious about the global-warming thing, though, then take my advice–look to coal, not gasoline.

  14. Well, I agree with most of what you say, but in your original post you wrote:
    "We should be talking about paying a lot of taxes to pay for things like transit and community swimming pools where we can enjoy our neighbors, instead of…" [a suburban lifestyle]. [And so-on and so-forth.]
    Which is it? Would the inevitable rise in fuel prices (if the darned government would just refrain from subsidizing consumption) incentivize us into a high-population-density lifestyle? Or should we tax the heck out of people to force them into a high-density lifestyle?
    In your original remarks (and in your follow-up), you seemed quite concerned with your personal view of the optimal lifestyle (with which other people may not agree). You advocated taxing people to force them into living as you prefer.
    If you think fossil-fuel prices will inevitably rise as supply runs out, then you don't have to tax anyone now. As prices rise, people will adjust their lifestyles accordingly. When they all live in little urban apartments, they'll vote local levies to finance parks.
    But perhaps you actually worry about greenhouse gasses, so you don't want us to burn all the fossil fuels before we change our lifestyles. In this case you should be interested in reducing greenhouse gas emissions as efficiently as possible. So you should go after coal. Burning coal (a) puts a heck of a lot of carbon into the atmosphere, and (b) can be eliminated without any new technology or any serious (therefore politically difficult) lifestyle change.
    If your real goal is changing lifestyles, with reducing greenhouse emissions just your excuse, go after transportation fuel use. But if your real goal is reducing greenhouse gas emissions, why plump for unpopular lifestyle changes? Go for the easy win–stop burning coal.
    Also, note that current US government policy is to *reduce* fuel consumption. Our government *increases* the price of fuel by taxing it and restricting supply. I don't mind the "highway user fee" aspect of fuel taxes, but the ethanol mandate adds between 8 and 20 cents/gallon (depending on weather and distance from Iowa, and considering tax-funded production subsidies) to no public purpose, and around 20% of Federal automobile-fuel taxes are diverted to mass-transit spending[1]. Gasoline-formulation rules drive up gas prices (as much as 20 cents/gallon in California) by restricting competition among refiners.
    Sure, the Feds extend a variety of subsidies and tax breaks to domestic crude oil producers, but these have little effect on the retail price of fuel. The US only produces about 10% of world oil supply (source CIA Factbook). The price of crude is set by the global market (by lower-cost producers than the US), and in 2004 the US imported 58% of crude oil consumed (source DOE). US subsidies increase oil-company profits, but they hardly lower fuel prices. Those subsidies are really just rent-seeking by the likes of Texas oil-family politicians like our beloved President.
    Maybe rising crude prices would eventually provoke US politicians to pander to the foolish masses by subsidizing fuel consumption, but we haven't seen that yet. Historically our politicians have been more interested in taxing fuel consumption (remember the 4.3 cent/gallon "deficit reduction" refined-fuels tax from 1990 to 2005? Of course, we're still paying that tax, but now the money is laundered through the Highway Trust Fund (mainly) instead of going straight to the General Fund).
    (Before you bring it up, I realize that European governments tax fuel a lot more heavily than we do, and spend the receipts on trains and so-forth. However, even Europeans have increasing sprawl (source EU gov't: google "sprawl 1na3.pdf"), so you would likely need a tax-and-regulate regime tougher even than Europe's to force serious lifestyle changes here.)
    Note [1]: Total US mass transit spending in 2004 was around $41 billion (source Wendell Cox). The Federal government paid almost a quarter of that (source USDOT). State and local governments paid most of the rest from their tax revenues. Transit riders paid very little indeed.
    (Transit spending is best understood as rent-seeking by local politicians and transit suppliers. Transit-worker unions support local pols in return for featherbedded contracts (remember the New York transit strike last year?) Transit-construction contracts are infamous for graft and corruption. Back in the late 80's Los Angeles spent over $1.2 billion/mile on light-rail construction, of which probably 50% was flat-out stolen.)
    Outside of a few very-high-density cities like New York, mass transit is simply too inefficient and inconvenient to survive without gargantuan tax subsidies. It's not a "tipping point" thing, where we could just supply some threshold level of transit and it would then attract enough riders to become self-sustaining. There's just no way that mass transit could ever compete with private vehicle transportation in lower-density communities. So if you want everyone to ride transit, you first have to force them to live jammed together like Manhattanites.
    And no, the other way around–build the transit and pray for people to move into high-density development around it–does not work. Portland, OR tried harder than any other city. First they built transit despite zero demand. Then they ceased building roads despite traffic jams. Then they outlawed suburban construction. Then they offered big subsidies and property-tax breaks to builders of "transit-oriented developments" (high-density housing and industrial parks next to transit lines). Still people just won't move in (except welfare-recipients who live where they're told). Almost nobody takes transit to work. Cities deploying less draconian measures achieve no more results.

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